decisionmoose

Description

LATEST SIGNAL: (10/08/2010) HOLD Long Treasury Bonds (BTTRX or TLT) through 10/17/2010. Index Moose switched from gold (GLD) to BTTRX (@ $66.91) on July 2, 2010, and unmargined, continues to outperform the S&P500 over multiple time periods. The Art of the Switch Look before you leap. While the Moose may sound simple and automatic, there is an art to maximizing your performance. There are two types of signal at the Moose: HOLD and SWITCH. They mean what they sound like they mean. Holding for more than a week or two after a "switch" signal is not recommended. Similarly, switching into a position in the middle of its 'hold" signal is not recommended-- particularly if there has been an appreciable price increase in the designated asset since the signal was first given. (See FAQs for more.) Switching out of an old position late, however, and going to cash between signals, may stem further losses. THEORY vs. REALITY Although the Moose is nominally invested in a particular asset ALL week, anybody who knows the way this site works (having read the FAQs), and who has followed it with real money, realizes that's never exactly what happens during a SWITCH week. A weekly theoretical model, the Moose works exclusively off Friday COB ("close of business") data. The site is usually updated by Sunday evening. In switch weeks, it "pretends" to have made the switch on the preceding Friday, when in fact the first opportunity to switch will be Monday. Now sometimes you can get Friday's price (or better) the following week, and sometimes you can't. As mentioned in the FAQs, the Moose is not a short-term construct. It may spoon-feed you a great intermediate term switch signal, but you do have to do a little of your own chewing before you swallow it. You have to apply your own short-term methods, timing each switch week as best you can. A switch is never automatic. It doesn't have to be at the Monday open (in fact, I generally advise against that), or even by the Monday close. (I've waited up to nine trading days to complete a switch.) The switch decision is, in reality, an open-ended one. Which is why we use Friday COB data. If not that number, which one? Why collect, store, and tabulate a second, third, or fourth time series, that is no more valid a benchmark than Friday COB? Keep it simple, stupid. THE PERFECT SWITCH On the surface, the perfect switch would seem to entail selling an undesirable holding on Monday (or after) at a higher price than the previous Friday's. After that, you have to buy something new and theoretically better on Monday (or later) at a lower price than last Friday's. Sounds tough. But does "perfect" mean that? Actually, no, it's far less rigorous. Sure, you'd like the asset you're selling to go up next week, right as the new asset you intend to buy dips for a moment. However, if you sell higher than last Friday's price, you can now afford to buy in (the same percentage) higher, and still break even. The same holds true if both assets head lower next week. If the asset you're buying falls in price, you can afford to sell at a lower price too. The only problem occurs when the old asset tanks, as the new one spikes higher, which isn't often.

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